Digital Auto Report 2020

Digital Auto Report 2020

Navigating through a post-pandemic world

Strategy&

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Strategy& | PwC

Digital Auto Report 2020

✓ Ninth annual Digital Auto Report, developed by Strategy& and PwC

✓ Global consumer survey with a focus on the US, EU and Asia (n = 3,000)

✓ Quantitative market outlook until 2035 based on regional structural analysis

✓ Interviews and survey with >60 industry executives at OEMs and suppliers, leading academicsand industry analysts

3

Volume 2

Rethinking business models and

investments

Volume 1

Anticipating post-pandemic

market dynamics

Volume 3

Building a software-enabled

automotive company

• Market outlook – penetration of technologies and mobility types

• Technology – shifting gears in connected, electric, automated

• Customers – changing mobility preferences: shared no more?

• Regulation – slowdown or acceleration of key policies?

• New business opportunities – hype or reality?

• Economic value – market growth and unit economics

• Investment strategy – OEMs vs. VCs vs. Tech players

• OEM survival guide for a post-crisis market reality

• Software development cost forecast

• Make, buy, partner strategy decisions

• Organization and culture transformation areas

The mobility ecosystem is transforming into a fragmented future w/different adoption patterns and use cases by region Executive summary – Volume 1

• With adjusted technology expectations and changing post-pandemic customer preferences, CASE evolves. Consumers do not expect fully

automated cars before early 2030s. Shared mobility growth is slowing down, relevance of seamless mobility remains high

• Total vehicle parc expected to shrink in Europe (-0.5% p.a.) while growing in the US (+1.1% p.a.) and China (+3.9% p.a.) until 2035, driven

by 1) mobility growth (highest in China), 2) customer preferences for sharing (lowest in US) and 3) vehicle disposal rate

• Regulatory requirements are driving basic connectivity in EU and US (>85% penetration of new cars in 2020), while China is still at 44%.

Total connected vehicle parc will pass 50% mark in Europe by 2025; in US as early as 2023 and in China latest by 2029

• EU and China are leading the e-mobility transformation with expected new car BEV share of 17% and 19% by 2025.

US significantly lower with 5% by 2025 given fewer government incentives and attractive ICE alternative in terms of TCO

• Automated driving will emerge in a broad spectrum of use cases with specific requirements that are difficult to scale. While e.g. L4 pilot projects

with people movers are running today, L4 share of new vehicles is expected to reach 17% by 2035 in EU (vs. 16% in China)

• Shifts in individual mobility patterns require a new segmentation in terms of private vs. shared and active vs. passive driving – each with

multiple use cases at different automation levels. Shared-active (e.g. rental, subscription) expected to grow strongest in EU (10% of total person

kilometers by 2025), while shared-passive (e.g. ride-hailing) is expected to grow significantly more in China (10% vs. 1-3% in US and EU)

• The increasing proliferation of use cases and business models requires many players to re-evaluate their CASE strategies

with a fact-based view on available technology, value pool sizes and unit economics as well as investment requirements and right to win

(→ covered in our next report volume No 2)

Strategy& | PwC Note: Please refer to respective section for detailed assumptions and sources behind stated propositions 4

Capturing CASE value opportunities requires refocused investment strategy aligned with player’s core capabilities Executive summary – Volume 2

• Expected market potential of CASE use cases varies according to our survey of 60+ industry experts in Europe, the US and China:

– Connected: Behind first peak of expectations with most value expected in B2B applications (e.g. fleet management)

– Electric: While BEV use cases are approaching plateau stage, fuel cell not yet at peak

– Automated: Higher value expectations in L4 goods transport than in private passenger transport

– Smart mobility: Micro-mobility with high value expectation – on par with ride hailing; view on air taxis not yet converging

• A plethora of well-funded startups are trying to capture this market potential and are putting traditional automotive players under pressure in connected,

electric and automated driving. For OEMs and suppliers, specific vehicle-centric business models are the most promising despite strong competition

– Connected: Vehicle-centric and beyond-vehicle B2C services expected to grow from $8bn to $66bn in EU/US/China by 2035

– Electric: Battery and powertrain market for OEMs expected to grow from $47bn to $568bn by 2035 – led by China (~$314bn) and EU (~$210bn)

– Automated: ADAS parts market for OEMs (L1-L5) expected to grow from $22bn to $142bn by 2035 – with China overtaking EU/US in 2030

• Looking at smart mobility, the line continues to blur between traditional car sales/leasing and alternative ownership with rental/subscription/

sharing/hailing/on-demand. Cost per kilometer ranges between $0.7 (subscription) and $2.1 (ride hailing) vs. $0.6 (own car)

• The market for alternative car ownership models (subscription, rental, sharing, ride hailing, on-demand) is expected to grow from $255bn to $1.084bn

in EU/US/China by 2035 – led by Europe with $549bn vs. China $362bn, due to higher consumer prices in mobility and value captured per km in EU

• The pandemic has widened the investment gap between OEMs and VCs and technology players. CASE investments of Top10 OEMs went from 47 to 16

transactions in Q1/2 ’20 vs. previous year, while VC invest grew from 36 to 66 transactions and Top10 Tech players remained flat (12 to 11)

• To compete in the long run in this dynamic mobility market, OEMs need to refocus their investment priorities along specific ways to play as well as

strengthen their digital capabilities and technology platform in a well-balanced build vs. partnership approach (see Volume 3)


Becoming a software-enabled automotive company will be key to continue capturing value in a transforming marketExecutive summary – Volume 3

• Increased demand for intelligent and connected functionalities will significantly change the Automotive product and related

services

• Software has become the differentiating factor for modern vehicles. Software development cost will almost double

– growing on average from €181m to €331m per model series over the next 10 years

• Autonomous driving functions will be the main cost driver with 45% of total software development cost by 2030

• With a growing spectrum of software components and functions, innovation leadership will not be possible in all areas. OEMs

and suppliers need to carefully select areas of own value creation

• Partnerships with competitors, suppliers and technology players on an equal footing can help to master complexity,

the need for talent and to reduce expenditure by 35-60% per project

• Transformation of mindset from strategy to decision making is needed across the company to adapt to the new paradigm and

to build successful software-enabled products


With adjusted technology expectations and changing post-pandemic customer preferences, CASE evolves”

S for Shared becomes Smart (Mobility)*

Strategy& | PwC

Connected Electric

Automated Smart Mobility

7

*Smart Mobility describes a transportation ecosystem where stakeholders use data and

connectivity to move people and goods sustainably and efficiently.

Shared mobility remains as a sub-segment and an important value pool in this ecosystem

focusing on people transport with passenger vehicles.

Source: Strategy&

Source: Strategy& 8

Triggered by the effects of the COVID-19 pandemic, many players will have to reevaluate their CASE strategies

COVID-19 reverses preference for mobility modes – own vehicles regain preference against shared

COVID-19 cools down economies, leads governments to subsidize EVs and increases EV market demand

COVID-19 digitizes society and increases acceptance and demand for digital – and connected – services

COVID-19 modifies competition: Big Tech benefits, asset-heavy OEMs struggle to keep up required R&D invest

Connected Automated

Smart mobility Electric

COVID-19 shatters old industries and will lead to market shakeout. Digital and remote tech is on the rise

COVID-19 postpones consumer spend during lock-downs. Demand recovery expected with preference for EV

COVID-19 imposes new norms for work environments, consumer interactions and international trade

COVID-19 cuts topline, accelerating saving needs of OEMs and suppliers as liquidity becomes critical to survive

TechnologyConsumer

Regulation Economics

Strategy& | PwC

Technology Consumer Regulation Economics

• Connected service content and UX

• Vehicle system/EE architecture

• Network infrastructure

• “Digitally savvy” share of population

• “Freemium” segment services

• Scope and timing of enforced connectivity requirements

• Scope of data privacy restrictions

• Indirect value capture by OEM

• Effective end consumer pricing

• Battery and powertrain performance

• EV manufacturability and production capacity

• Charging infrastructure

• Premium/early adopter segment size

• “Rational green” segment size

• Emission target levels

• BEV/PHEV incentives

• Diesel/ICE bans/restrictions in cities

• Superior total cost of ownership (TCO) of BEV vs. ICE in relevant number of segments

• Additional revenues/savings from V2G/V2X charging

• ADAS capability by use case

• Data processing

• Driver UI

• Network and traffic infrastructure

• Premium/early adopter segment size

• Technology openness

• Scope and timing of enforced ADAS safetyfeatures

• Geographic range and quantity of AV test drive/ vehicle approvals

• Superior TCO vs. non-AV in first commercial cases

• Additional value capture from riders

• Smartphone penetration

• Access and fleet availability

• Intermodal openness

• People/traffic density “Frequent user” segment size

• Private car restrictions/ taxes

• Passenger transport regulation

• Superior TCO vs. own vehicle

• Dynamic pricing for opt. use and availability

The acceleration of technology penetration will occur at varying times and speeds globally, as local mobility transforms Key considerations to anticipate tipping point of exponential technology adoption

Strategy& | PwC

ADAS = Advanced Driver Assistance Systems; EE = Electric/electronics, V2G = Vehicle to grid, TCO = Total cost of ownership

Note: A tipping point is defined as the start of exponential growth within a segment of the mobility transformation

Source: Expert interviews, PwC Autofacts®, Strategy&

Automated

Electric

Connected

Expected tipping points

earlier 2030 later

earlier 2030 later

earlier 2030 later

earlier 2030 laterSmart

Mobility

9

Total car parc growth strongest in China with high penetration of connected and electric; automation relevant after 2025Total vehicle parc and technology penetration (in million, %)

Strategy& | PwC 10

281 289 310 332

13 16 17 18197

250302

350

2228

3134

100%

44%

100%91%

0% 0% 1% 2%

2020 2025 2030 2035

0% 0% 3%16%

2020 2025 2030 2035

4%19%

33%55%

87% 100% 100% 100%

2% 5% 8% 14%

(eCall, % new LV sales)

Connected

(BEV, % new LV sales)

Electric

(L4/L5, % new LV sales)

Automated

302 308 294 281

14 17 17 17

New LV sales

(million)

Total LV parc

(million)

0% 0% 7% 15%

2020 2025 2030 2035

4% 17%34%

67%

86% 100%100% 100%

• Total vehicle parc driven by− Growing economic mobility

demand after COVID-19

− Build-up of new mobility fleets with high annual mileage

− Disposal of outdated vehicles

• Basic connectivity with high penetration due to regulation in US/EU; share with over-the-air (OTA) capability significantly lower

• BEV with strong growth in EU/ China due to government subsidies and earlier “total cost of ownership” parity (vs. ICE) than in the US

• Delay of automated vehicle penetration at L4/L5 due to technical challenges and investment cuts; L3 with first useful applications before 2025

Assumptions

Source: PwC Autofacts®, Strategy& LV = Light vehicles = Cars + light commercial vehicles < 6t GVW BEV = Battery electric vehicle ICE = Internal combustion engine

Strategy& | PwC 11

Connectivity will rapidly penetrate total car parc; OEMs need to leverage platforms for scale, while maintaining distinct UXTotal vehicle parc and connected car share (in million, %)

281

2035

93%

26%

20302020 2025

50%

78%

302 308294

Connected Vehicles Non-Connected Vehicles

96%

2025

32%

2020 2035

72%

2030

97%

281 289310

332

2020

16%35%

302

2025

56%

20352030

72%197

250

350

Total vehicle parc expected to shrink in Europe (-0.5% p.a.) while growing in the US (+1.1% p.a.) and China (+3.9% p.a.) until 2035 – connectivity penetration >50% after 2025 in Europe and US.

Source: PwC Autofacts®, Strategy&

Strategy& | PwC 12

The shift from conventional to electric powertrains is under-way; China and Europe head-to-head in market penetrationNew vehicle sales by powertrain (in million, %)

17%

4%3%

2020

93%

9%

74%

2025

1%

34%

10%

55%

2030

4%

67%

11%

17%

2035

14

1717 17

1%5%

2% 1%

2020

16

97%94%

2025

8%1%

90%

2030

1%

14%

2035

1%

84%

13

1718

60%

2020

4% 1%

19%

2025

95%

6%

74%

33%

7%

2030

5%

55%

9%

32%

2035

22

28

31

34

FCEV PHEVBEV ICE (incl. HEV) Source: PwC Autofacts®, Strategy&

Tightening CO2 emission targets in the EU and new

national guidelines in China accelerate BEV penetration

in these regions significantly faster than in the US.

Strategy& | PwC 13

Automated driving will not arrive with a big bang: Various useful functions and features will pave the way for L4New vehicle sales by SAE level (in million, %)

2020 2025 2030 2035

14

17 17

4%

17

100%

13%

96%

80%

7%

71%

14%

14%

1%

L0-2 L3 L5L4

2020

100%

2030

94%

2025

5%

88%

10%

13

1%

84%

13%

2035

2%16

1718

15%

100%

8%

34

99%

2020

1%

2025

89%

3%

20352030

66%

18%

1%

22

2831

Source: PwC Autofacts®, Strategy&SAE = Society of Automotive Engineers

Before deploying L4 passenger vehicles at scale, players will push the

next years for specific automated driving applications in transport /

fleets and logistics / industrial areas to recover investments.

Strategy& | PwC 14

Transformation of mobility refocused towards shared active and passive modes due to COVID-19 and slower automationMarket penetration by mobility mode (in ‘000 billion person-kilometer, %)

92% 87%79%

72%

2%3%

7%

10%16% 21%

6%

2020 2030

5%

5.3 5.4

20352025

4.7 5.1

97% 97% 97% 97%

1% 1% 1% 1%

2025

2%2%

20302020

2% 2%

2035

6.45.3 6.76.1

89% 88% 87% 86%

9% 10% 11% 12%2% 2% 2%

2030 20352020

2%

2025

8.5 10.4 12.2 13.8

Shared active

[e.g. car sharing, rental]

Private active / passive

[e.g. own vehicle]

Shared passive

[e.g. ride hailing, (robo-) taxi] Source: PwC Autofacts®, Strategy&

Global market remains difficult to address with one mobility

service given high proliferation of different active & passive driving

use cases – new players invest in multi-mode transport platforms.

This report series lays out in three volumes 1) CASE drivers, 2) economic opportunities, and 3) capability implications

Strategy& | PwC

Consumer Technology Regulation Economics

Opportunity

sizing and

investments

Automated

Electric

Connected

Smart Mobility

Software

Build-up

and

partnering

Volume 1 Volume 2 Volume 3

15

Anticipating post-pandemic market dynamics1

16

Volume

Consumers seek convenient and safe mobility – private transport modes regain importance”

Strategy& | PwC 17Source: Strategy&

Consumer Technology Regulation

Automated

Electric

Connected

Smart Mobility

Digital Auto Report 2020 – Volume 1

Survey among 3,000 consumers in Germany, the US and China shows latest shifts in consumer mobility preferences

Strategy& | PwC 1) Questions on COVID19 effects of mobility behaviour in DE partially n=2,000 2) converted from EUR/CNY (Mid of August 2020) Remaining % up to 100% “not specified” 18

• While new car purchase options lead across

regions pre- and post-pandemic, interest in car

subscription is growing strongly in China

• Regular cleaning / disinfection has become

most important feature for shared mobility

offerings to ensure usage during COVID-19

• Respondents confirm relevance of connected

services – security & navigation most important

• However, willingness to pay overall lower than

most OEMs hoped for

• Consumers expect AD vehicles in the early

2030’s; first in transportation, later in private cars

• Two thirds of respondents would use

automated vehicles; of those 75% would pay a

premium for an automated driving of 5 – 20%

per ride

Key results

n = 1,0001)

Gender(%)

n = 1,000 n = 1,000

49 51 49 51 51 49

Age(%)

Gross

monthly

household

income2)

(%)

26 40 29

<2,000 USD 2-4,000 USD >4,000 USD

17 34191515 16 18 271722 27 141721 21

18-29 30-39 60+40-49 50-59

3 >20 >3,000regions questions Respondents1)

10 7015 47 2329

Consumer – Overview

Respondents highlight the importance of connected services -– safety and navigation rated as most important featuresConnected services – By importance for consumers1)

Strategy& | PwC

1) Share of respondents, who want to have connected services in their vehicles

Source: PwC Strategy& consumer research 2020; n=3,000 (1,000 DE, 1,000 US, 1,000 CN) 19

In Germany in particular,

safety and navigation rank

as most important services.

Winning consumers in other

categories requires strong

USP and compelling story.

75%

Safety

Lifestyle and

comfort

Navigation

80%

Mirror smartphone

in car

Vehicle

management

Vehicle features

as a service

Infotainment/

Enterntainment

58%

58%

47%

42%

39%

90%

68%

83%

71%

63%

67%

59%

74%

92%

93%

84%

83%

79%

71%

Question: “Which connected

service categories are

particularly important to you?”

Consumer – Connected

Customers want in-vehicle connected services; however, willingness to pay might be lower than OEMs hope

Strategy& | PwC

1) Local currency conversion to USD as of mid of August 2020 2) “Individual” plan 3) DAZN basic package for GER and USA, basic Tencent package in China 4) iPhone 11 64GB, 24 months leasing

Source: PwC Strategy& consumer research 2020; n=3,000 (1,000 DE, 1,000 US, 1,000 CN); International Telecommunication Union 2019 20

Fully-fledged connected

service offering

Spotify

subscription2

Mobile voice &

data contract

Premium

sports stream3)

$ 19.5

at 31%

willingness

$ 4.3

at 58%

willingness

$ 11.9

$ 10.0

n/a

$ 34.6

$ 43.6

$ 9.8

$ 14.2

$ 19.9

$ 10.3

$ 17.6

at 40%

willingness

$ 39.5

$ 35.3

$ 33.4

iPhone

leasing4)

China with highest share of

consumers (58%) who are

willing to pay an extra for

connected services .

Capturing this value requires

providers to compete partially

against other digital services.

Question: “Would you like to have

Connected Car services integrated

in your vehicle and are you willing to

pay a surcharge for this? If yes, how

much…”

Connected services – Willingness to pay1)

reference prices of other digital & media servicesvs.

Consumer – Connected

Monthly willingness to pay

Σ 37

Σ 32

Σ 62

Σ 68

Σ 67

Σ 32

53

23

63

24

67

25

Gasoline still most preferred type of powertrain in Germany and the US; hybrid gains popularity and is most popular in ChinaPreferred type of powertrain by age (%)

Strategy& | PwC Source: PwC Strategy& consumer research 2020; n=2,000 DE, n=1,000 US, n=1,000 CN Percentages may not total 100% due to rounding 21

ICE –

Gasoline

& Diesel

PHEV

& BEVΣ 57

Σ 33

Σ 62

Σ 39

Σ 42

Σ 68

Σ 51

Σ 54

Σ 54

Σ 46

Σ 48

Σ 45

37

24

42

32

47

33

31

46

39

39

39

45

17

9

9

22

16

12 7

8

14

6

9

17

18

22

3

2

Gasoline Diesel

PHEV BEV PHEV BEV PHEV BEV

Gasoline Diesel Gasoline Diesel

40-59 years

>60 years

<40 years

Age segment

While 68% of Chinese

consumers below 40 years prefer

electric powertrains over

gasoline, only 46% in Germany

and 37% in the US share this

preference.

Question: “Suppose you wanted to

buy a car: Leaving aside financial

aspects, legal requirements and

lack of infrastructure […] – which

type of drive do you like best?“

Consumer – Electric

Two thirds of respondents would use automated vehicles; of those, 75% would pay a premium for an automated driving serviceAutomated driving – Consumer attitude, impact factors and willingness to pay

Strategy& | PwC

Source: PwC Strategy& consumer research 2020; n=3,000 (1,000 DE, 1,000 US, 1,000 CN)

* Average willingness-to-pay a premium for a 5km ride with an automated vehicle instead of having a chauffeur or self-drive

Attitude towards AV (%)

36 36

9

28 26

32

36 38

59

would

not use

AV

CNDE

would use

AV only at

low speed/

parking

US

would

use AV

Top 3 Deterrent factors for using AV(% of respondents)

Top 3 Persuasive factors for using AV (% of respondents)

“Would you be willing to pay a

premium for an AV (e.g. car

sharing, ride hailing)? If yes,

how much more would you

pay for a 5 km trip with a base

price of 10 €/10$/20¥?”

Willingness to Pay

37%26% 23%

Curious

about

driving

AV

Road

traffic

safety

Accident

and

speeding

reduction

29% 26% 23%

Accident

and

speeding

reduction

Curious

about

driving

AV

Use time

for other

activities

47% 44% 41%

Use time

for other

activities

Relax

while

driving

Accident

and

speeding

reduction

32%22%

15%

Desire

to drive

Loss of

control

Lack of

trust in AD

technology

34%

19%14%

Desire

to drive

Loss of

control

Lack of

trust in AD

technology

7% 4% 3%

Desire

to drive

Loss of

control

Lack of

trust in AD

technology

120 ¥210 €Base price

Premium

210 $Base price

Premium

Base price

Premium

22

Consumer – Automated

Mobility modes shift due to effects of COVID-19 – use of own vehicle preferred over shared mobility and public transportMobility patterns after COVID-19 restrictions (%)1)

Strategy& | PwC 23

43

27

26

24

37

31

60

35

15

30

502723

392734

512425

432725 22

67

30

4025

44

24

21

26

35

9

5622

572222

562222

53

38

45

32 3533

Taxi,

Uber, …

Own

bike

By foot 30

77

32

2431Own car

64

18

2510Public

transport

79157

Shared

micro-

mobility

5Car-

sharing

4 7620

SameMore Less

1) On the example of transportation to/from work

Source: PwC Strategy& consumer research 2020; n=1,259 DE, n=593 US, n=779 CN; Percentage may not total 100% due to rounding

Own car is the clear winner in the

US and China. In Germany, the

intended increase of car usage

is on par with bike and foot.

At the same time, Germans move

away strongly from shared modes.

Question: “Assuming COVID-19

restrictions are lifted again, how

would you use the following mobility

modes compared to pre-COVID-19

times?”

Consumer – Smart mobility

Shared mobility providers win consumers back with clear disinfection concepts rather than with lower pricesAttitude towards shared mobility after COVID-19 lockdown (%)

Strategy& | PwC Source: PwC Strategy& consumer research 2020; n=2,000 DE, n=1,000 US, n=1,000 CN 24

42 58

No usage of shared mobility offerings at all Open towards usage of shared mobility offerings

982

Regular cleaning and

disinfection by the provider (28%)

Lower/cheaper

prices (25%)

Reliable availability (24%)

…

Higher quality/premium

vehicles (11%)

Offer of gloves and masks in

the vehicle (15%)

1|

2|

3|

9|

8|



Lower/cheaper

prices (40%)

Provision of disinfectants to/in

every vehicle (39%)

…

Extensive geographical

coverage (17%)

Reserved parking spots

(26%)

1|

2|

3|

9|

8|



Provision of disinfectants to/in

every vehicle (49%)

Lower/cheaper

prices (42%)

…

Extensive geographical

coverage (33%)

Reserved parking spots

(32%)

1|

2|

3|

9|

8|

17 83

In Germany, quality / premium

vehicles seen as least important

factor to return to shared modes –

after cleaning, price and

availability are most important.

Question: “Which requirements

should providers fulfill to ensure that

you would continue using shared

mobility offerings after COVID-19

lockdown?

Consumer – Smart mobility

Purchasing a new vehicle remains preferred option across regions; China shows strongest increase in subscription intentLikelihood to buy/lease/subscribe to a car before/after COVID-19 (%)1)

Strategy& | PwC

1) Before= 1 year ago, after = within next 1-2 years

Source: PwC Strategy& consumer research 2020; n=2,000 DE, n=1,000 US, n=1,000 CN Difference to 100%: no/low likelihood to buy/lease/subscribe a car

24%

18%

11%

9%

21%

19%

10%

8%

Purchase of

a new car

Purchase/lease

of a used car

Lease of a

new car

Subscription

of a new car

46%

40%

29%

24%

44%

39%

27%

25%

Likely / very likely before COVID-19 Likely / very likely after COVID-19

68%

48%

50%

62%

75%

52%

54%

65%

25

China, and partly the US, are

open towards subscription

models.

In Germany, further market

education needed to win

subscription customers.

Question: “Taking the position of

pre-COVID-19, how likely was it that

your household would buy, lease or

subscribe to a new vehicle in

2020/2021? How likely is it now?“

Consumer – Smart Mobility

Technology progresses fast – yet complexity of autonomous driving has been underestimated”

Strategy& | PwC 26

Consumer Technology Regulation

Automated

Electric

Connected

Smart Mobility


In connected services, OEMs are currently rethinking their “build vs. buy strategy” on key technology components Connected services components

Strategy& | PwC

CRM = Customer relation management ECU = Electronic control unit HW = Hardware I/O = Input/Output MNO = Mobile network operator

SDK = Software Development Kit SW = Software VR = Virtual reality V2X = Vehicle-to-x communication Source: Strategy&

Technology – Connected

Key value

blocks

• Centralized E/E

architecture with zonal

ECUs

• Sensor fusion and virtual

sensors

• Subscription vs. life-time

offer model

• Customer identification

• VIN to UID

• Data privacy

• Cloud infrastructure costs

• MNO costs

• Regional regulations

Vehicle architecture and

ECUsCloud infrastructure

Mobile/local network

Regulation

I/O devices (e.g., sensors,

displays)

3rd party hardware (e.g.

VR glasses)

• OTA update functionality

• Data processing and

intelligent data fusion

• Security of data

connections

Automotive security

Vehicle OS, over-the-air-

update and cloud platform

Data analytics

• 3rd party content and app

store integration

• Transmission, collection,

and analysis of vehicle

health data (e.g. based

on sensor data)

User interface and

controls

System integration

Cloud/hybrid services incl.

vehicles health services

Offering bundling and

pricing

User ID and

personalization

Customer support

Plan – Build – Ship – Update – Sunset

Enabler Hardware Software Integration Sales and CRM

Current

limitations

Content/Service

Vehicle-based services

and apps

3rd party content and

services

Data interfaces and APIs

• UI design (e.g. graphical

vs. voice only),

• Online-first vs. offline-first

• Open vs. closed APIs

Current

develop-

ments

• Evaluate sweet spot

between complexity

reduction and profitability

• Enable expendable vehicle

architectures

• Bring user sign-up and

log-in journey to perfection

• Connect to existing

ecosystems (e.g. phone)

• Leverage eSIMs for

customers and more

frequent MNO tenders

• Define software-value-add

strategy Use virtualization

to securely separate

domains

• Leverage smartphone

integration for non-

connected markets

• Focus on differentiating

adaptive user interface

• Provide and monetize

SDKs and interfaces for

3rd parties

Crucial value blocks (own know-how necessary)

27

Fuel cell systemInternal combustion engine Electric drivetrain (electric motor, inverter, transmission)

Technology progress in e-mobility must be evaluated in the context of tech trends across various alternative powertrainsAlternative powertrain developments

Strategy& | PwC

OBC = Onboard charger DC charger = Direct current charger

Source: Strategy& 28

Optimization of fiber winding

layout and process

Mixed materials to reduce

costs

Compressed H2 as standard

for passenger vehicles

HV battery system

ICE FCEVBEVPHEV

Stack

Increase of power density

Optimization of catalyst

compositions (reduction of Pt)

and nano-scale microstructure

Optimization of bipolar plate

coatings

Balance of plants

Stack internal humidification

and simplified water mgmt.

Tank

High voltage system and architecture

Electrification

Recuperation and boost as standard

features with 12V (budget) or 48V

Increased electrification of auxiliaries

(water/oil pumps, cam phaser, etc.)

P2 topology avoiding drag torque

Combustion/emission optimization

Increasing injection pressures

Variability in valve trains

Particle filters for most powertrains

including DI gasolines

Variable compression ratio through

variable connection rod

Reduction of friction losses

Coatings and microstructural

modifications on cylinder

Optimization of crankshaft bearings

Ball bearings for turbocharger System design

Structural integration of

housing into vehicle body

System design

incl. recyclability

Architecture

Integration of power-units

(OBC, DCDC, DC charger)

Top models up to 800 V,

standard in volume 400 V

Auxiliaries

Increasing commoditization

of electrified auxiliaries

Efficiency improvement

Silicon carbide power semi-

conductor switches (inverter)

Bar windings and increased notch

filling degree in electric motor

Cost reductions

Increased integration of

inverter and motor

Cell innovation

Increased cell capacity through larger cells

Cathode cost reduction by minimization of cobalt

content and cobalt-free cells

Increased anode energy density via silicon

Intrinsic safe cells by application of solid state

electrolytes (polymers, inorganics, blends)

Dry (solvent-free) processing of electrode coatings

Technology – Electric

H2 O2

+–

BEVs will become economical for several segments – but extended ranges (600 km+) will not be viable with BEVsElectric powertrain operating cost break-even timeline (vs. ICE)

Main assumptions: electricity and fuel prices as for Germany 2020; H2 price 5€/kg; PHEV driving modes 40% EV mode/60% ICE mode; FCEV driving modes 40% EV mode/60% FC mode

One-time buying incentives not considered Source: Strategy&

Technology – Electric

Strategy& | PwC 29

There is no fixed point in

time when battery

electric vehicles offer an

operating cost advantage

over internal

combustion engines – it

depends on factors such

as the vehicle segment

and range"

Vehicle

segment Range

Viable

powertrains

A/BBudget

70 kW

Low

Mid

Long

150 km

300 km

600 km

C/DVolume

100 kW

Mid

Long

Extra-long

300 km

600 km

800 km

E/FPremium

250 kW

Mid

Long

Extra-long

300 km

600 km

800 km

Evolution of TCO leader

2025 20302020

Break-

even

2019

2027

2040

2024

2035

2038

2018

2024

2028

H2 O2

+–

H2 O2

+–

H2 O2

+–

H2 O2

+–

H2 O2

+–

H2 O2

+–

H2 O2

+–

H2 O2

+–

H2 O2

+–

H2 O2

+–

H2 O2

+–

Automated driving technology developments

Strategy& | PwC

Technology – Automated

• Radar and camera sensors are

developed with a good cost position

• Cheap LiDAR systems do not yet

have the necessary performance

• New ADAS computers based on low

power tech are under development

• Different driver assistant systems

mandatory beginning 2022 in EU

Softwaree.g. smart data usage

Infrastructuree.g. 5G

• Test and validation not yet mature

• Motion prediction still not

completely solved

• Very large amounts of test data

complicate traditional analytics

• So far, there are only a few test

tracks that are fully developed for

automated driving

• Expansion of 4G by 2022 for

motorways in DE as basis for 5G

• For the time being only pseudo 5G

based on 4G (non stand-alone)

Hardware e.g. sensors

Current status and limitations

30

Hardware, software and infrastructure of automated driving are improving, but overall progress slower than expected

Surround view

Surround view

Park

assist

Emergency braking

EnvironmentMapping

Cross traffic alert

Lane assist

Traffic sign recognition

Rear collision warning

Environment mapping

Blindspot

Park

assist

Rear view

Topo-graphydetection

Collision avoidance

Pedestrian detection

Drivermonitoring

Emergency vehicle

recognition

Ultrasound Short-/medium-range radar Camera

LIDAR Long-range radar Microphone

Source: Strategy&

While L3 enables various attractive use cases, user experience and system complexity breakthrough is happening at L4Automated driving SAE levels and AD function mapping

Strategy& | PwC Source: “SAE International Standard J3016”, SAE; Strategy&


HIGH

LOW

SAE level Narrative definitionVehicle

control

Environment

monitoring and

user interface

Fallback for

dynamic

driving task

System

capability Exemplary AD functionalities

5 Full

automation

The system performs

all aspects of

dynamic driving

(driving-mode

specific)…

…under all environmental and

road conditions that can be

managed by a human driver

System

System

Alternative or

conventional

user interface

System

All driving

modes

• Universal pilot (full autonomy)

• Interactive pilot driving (control via touch/gesture UI)

• Robo-taxi and automated people-mover (all

conditions)

4 High

automation

…even if a human driver does

not respond appropriately to a

request to intervene

Most

driving

modes

• Urban/rural/highway pilot with multi-lane change

• Robo-taxi and automated people-mover

• Urban last-mile delivery

• Automated valet parking

3 Conditional

automation

…expecting the human driver

to respond appropriately to an

intervention request

Human

Some

driving

modes

• Urban/rural/highway assistant (e.g. hands-off traffic

jam, intersection movement, single lane change)

• Parking chauffeur

• Assisted fleet operations (on-site, off-highway)

2 Partial

automationThe human driver

performs remaining

aspects of dynamic

driving, while the

system…

…executes both steering and

acceleration/deceleration

(driving-mode specific)…

Human

Conventional

user interface

• Adaptive cruise control

• Remote/key parking assistant

• Lane change assistant

1 Driver

assistance

…executes either steering or

acceleration/deceleration

(driving-mode specific)Human and

System

• Adaptive cruise control

• Driver assisted parking assistant

• Lane keeping assistant (system steers)

• Blind spot monitoring rear/side (system steers)

0 No

automation

The human driver performs all aspects of dynamic

driving, potentially “enhanced” by warning or intervention

systems Human

n/a• Pre-/forward- collision braking

• Front/rear cross-traffic alert with braking

AUTOMATION

31

Commercially viable automated driving applications at L3 and beyond will start becoming available for specific use cases firstAutomated driving timeline of commercial road availability

ADAS = Advanced Driver Assistance Systems UN/ECE = United Nations Economic Commission for Europe

1) Indicating start of availability. Tipping points of significant adoption expected significantly later in certain fields Source: Strategy&

Robo-taxiNo defined routes

2-6 seats

People moverPre-defined route(s)

7-12 seats

Owned vehicleNo defined routes

2-5 seats

Level 4

Level 5

xx Max. speed

Area restriction

Construction

area capable

Automated

lane changes

130

30 Restricted

Areas 50 Restricted

Areas

60 Restricted

Areas

Rural

(Sub-)Urban

Rural

Urban

Highway

• ADAS technologies require

higher development cost

and efforts than anticipated

• ADAS sensors still far

above target cost, due to

small production volumes

and sensor fusion/

recognition challenges

• Regulation still uncertain

with the UN/ECE technical

framework and national

rules not yet fully in place

• While first L3 vehicles

expected for 2021/22, first L4

road applications beyond

pilot projects expected for

~2025

Current developments

Strategy& | PwC

Last mile logisticsUrban

2021 2023 2025 2027 2029 2031 2033 2035

Pre-defined route(s)

e.g., parcel station

Level 3

Level 2+

40 Restricted

Areas

60Restricted

Areas130

100 Restricted

Areas

50Restricted

Areas

60 Restricted

Areas

Closed compounds

50

100


(Sub-)Urban

Urban: Traffic situations with many traffic interactions and low speeds

Sub-Urban: Traffic situations with moderate traffic interactions and moderate speeds

Rural: Traffic situations with few traffic interactions and higher speedsVehicle follows user

20 Restricted

Areas

130

Commercial availability (beyond pilot projects)1)

32

33

Individual mobility splits into four modes of private vs. shared and active vs. passive driving, each with increasing automationPrivate/shared mobility modes with selected automated driving use cases

Strategy& | PwC

1) Includes self-owned, family-owned, credit-financed, long-term leased, personal company car 2) Includes rental, subscription (up to 1 year), ride-hailing, ride-sharing, car sharing, pool car, car club

3) “Passenger” determines mobility purpose and target, passenger selects means of transport and expected time of arrival, mobility system determines detailed routing and actual time/place of arrival

4) “Driver” determines mobility purpose and target, driver determines means of transport and plans arrival time, driver determines detailed routing and actual time and place of arrival through user interface (UI)

Source: PwC Autofacts®, Strategy&

ACTIVE4)

I am the driver

PASSIVE3)

I am a passenger

Technology – Smart mobility

L3

L0-2

L3

L4

L5

L0-2

L3

L4

L5

L0-2

L4

L5

PRIVATE 1) Personally-owned vehicle SHARED 2) Collective vehicle or rideA

UT

ON

OM

AT

ION

LE

VE

LA

UT

ON

OM

AT

ION

LE

VE

L

L0-2

L3

L4

L5

Private/family driver

Universal pilot

Taxi, ride hailing/pooling

RobotaxiAutomated

people mover

Self drive Car sharing, rental, subscription

Urban/rural/highway pilotAutomated

valet parking

Interactive pilot driving

(vehicle control via touch/gesture UI “for fun”)

Urban/rural/highway

assistant (for private driver)

Interactive pilot driving

(vehicle control via touch/gesture UI “for fun”)

Parking assistant

(for private driver)

Urban/rural/highway

assistantParking/pick-up assistant

Urban/rural/highway

assistantAssisted fleet operations

(on operator site)

Urban/rural/highway

assistant (for public driver)

Differentiating AD use case

Traditional base use case

Seamless smart mobility services require a modular, open API-based technology architecture and platform approachSmart mobility technology platform building blocks

Strategy& | PwC

In contrast to individual mobility, providing

smart mobility requires a modular

technology and system architecture,

capable of integrating various partners

across the ecosystem with focus on

• Flexibility to integrate multiple modalities and mobility service providers (with different brands)

• Cross-platform customer acquisition and seamless sign-up/-in

• Region-specific/local mobility product configuration and partner management, incl. ride request/ offering brokerage

• Real-time environment/asset condition-based routing

• Predictive maintenance scheduling

• Predictive asset lifecycle management

Current developments

Technology – Smart mobility

AP

I, I

nte

gra

tio

n,

Sto

rag

e

Fleet disposition (own or partner fleets)

Demand & supply

prediction

Fleet location

and routing

Ride request &

matching

Product and quotation management (B2C or B2B or B2A)

Product configuration

and calculation

Real-time ride sourcing

& negotiation

(Dynamic) consumer

pricing

Operations

Vehicle condition

monitoring

Maintenance and

repair management

Asset lifecycle

management

Mobility service

providers

Retailers and

media

Value-added

service providers

Public transport

operators

Events & weather

conditions

Traffic mgmt.

systems

User devices

Infrastructure

User interface

and experience(rider, driver, partner)

Customer acquisition

and retention(direct, indirect)

…

Booking and ticketing Billing and payment

Ad

va

nc

ed

an

aly

tics

Customer operations

Identity and access Rating and loyalty Exception handling

34

Partners & Data Sources Platform Capabilities

Source: Strategy&

Regulation aims to accelerate the mobility transformation – but following very different approaches across regions”

Strategy& | PwC

TechnologyConsumer Regulation

Automated

Electric

Connected

Smart Mobility


35Source: Strategy&

Dynamic regulatory discussions shape CASE trends – impacting EV penetration and speed of AV testing rollout in particularLatest regulatory initiatives and discussions

USA

AUTOMATED: Announcement to unify AV policies

across 38 federal departments enforcing a consistent

regulatory approach (01/2020)

AUTOMATED

New EU CO2 emission

targets, applying as of 01/20201)

ELECTRICConnected: New guidelines on the

processing of personal data (EDPB, 02/2020)

AUTOMATED: Addition of new advanced

test scenarios to rate AEB technology

(2020 EU NCAP update)

CONNECTED

AUTOMATED Shared: New governmental regulations

promoting shared mobility (e.g. free parking)SHARED

Regulation

Heterogeneous regulatory dynamics; focus on

commercial dimension, less on sustainability

NHTSA with plan to introduce

upgrades to NCAP, involving new safety technologies

and test procedures (10/2019)

AUTOMATED

Note: (1) the regulation targets a 15% reduction for passenger cars from 2025 onwards and 37.5% reduction from 2030 on. (2) e.g. establishes strict requirements for Automated Lane Keeping Systems. (3) incorporates "lessons-learned

based on accumulated field experience in testing prototype ADS-operated vehicles on public roads“. (4) general regulatory sentiment derived from various expert opinions across politics and industry, e.g. automotive associations. AEB =

Automated Emergency Braking; AV = Automated vehicle; NCAP = New Car Assessment Program; NHTSA = National Highway Traffic Safety Administration; UNECE = United Nations Economic Commission for Europe

Source: Strategy&

Automated Release of the “Strategies

for Innovation and Development of Intelligent

Vehicles” with focus on creating an ecosystem

for AVs in China (02/2020)

Autonomous: Plans for new changes

to the NCAP test program with new safety

additions (following the Euro model)

AUTOMATED

AUTOMATED

Top-down approach based on long-term

strategy with positive impact on CASEAutonomous: Updated guidelines to

enforce advanced safety features (01/2020)

AUTOMATED EU states with a siloed / bottom-up

approach towards CASE regulation

Electric: New national guidelines on

safety requirements and standards for EVs

(coming into force by January 1st 2021)

ELECTRIC

EU

GLOBAL

Connected: Internationally harmonized and binding UN norms on cybersecurity and software requirements for OEMs (06/2020, UNECE’s World Forum for Harmonization of VehicleRegulation, WP.29)

Automated: First binding global regulation on level 3 vehicle automation with focus on advancing safety (UNECE’s World Forum for Harmonization of Vehicle Regulations)2)

AUTOMATED

CONNECTED

Automated: Updated standards for on-road testing of level 3, 4 and 5 prototype ADS promoting a standardized groundwork for AV tech (09/2019)3)

AUTOMATED

Recently introduced regulations at UN level with positive

impact on CASE adoption, further steps still required

China

Limited national support (i.e. plans to

terminate EV subsidies)

ELECTRIC

Strategy& | PwC 36

Neutral expert sentimentPositive expert sentiment Negative expert sentiment

Rethinking business models and investments2Volume

RegulationTechnologyConsumer

Volume 1 – Recap

This volume focuses on 1) new business opportunities, 2) market potential and economics and 3) investment trends

38

• Connected, Electric,

and Automated Driving

technologies evolve at

different speed and with

a multitude of use

cases for Smart Mobility

• Consumers continue to

show a high level of

interest in new

technologies, yet with

regional differences and

uncertain willingness

to pay

• Regulators struggle to

provide consistent

framework for actively

shaping the mobility

transformation

Volume 2 – Scope of this document

Economics• Capturing economic value in a

transforming mobility market

requires

1. Realistic view on CASE use

case potential and maturity,

based on broad range of

different expert perspectives

2. Fact-based assessment of

true market potential of

individual business models

and applications

3. Focused investment

decisions to strengthen

differentiating capabilities and

pursue achievable way to

play

1

2

3

Automated

Electric

Connected

Smart Mobility

Source: Strategy&Strategy& | PwC

60+ industry experts were surveyed to better understand the maturity of emerging CASE technology use cases

Strategy& | PwC 39

1 Business opportunity maturity

• 60+ industry experts have been asked to

evaluate ~30 use cases along market

potential and technical viability:

• Connected use cases behind first peak of

inflated expectations – most value expected

in B2B applications (e.g. fleet management)

• While BEV use cases start to plateau, fuel

cell possibly not yet at peak

• Automated driving use cases with higher

value expectations in L4 goods transport

than in private passenger transport

• In smart mobility, micro-mobility with high

value expectation – on par with ride hailing

• View on air taxis still unclear, to some

extent seen as niche market

Key takeaways

Air taxis

Full AD

people

mover

BEV truck

Predictive

navigation

Automated

valet

parking

Expert survey – CASE use case value and viability

Expected

value

Technical viability High

Smart

surfaces

Source: Strategy& expert survey in EU/US/CN (n=63)

AR

entertainment

Intelligent

voice assistant

Technical viability

Smart

surfaces

Expected

value

Predictive

navigation

Fitness health

tracking

Al fleet

management

• Overall, connected use cases behind first peak of inflated expectations

• No clear winner – B2B applications (e.g. AI fleet management) with slightly higher expected potential than B2C (e.g. Fitness tracking)

Experts see most connected and electric use cases behind the first expectation peak – fuel cell development still uncertainUse case evaluation (1/2) – Connected and Electric


Connected

Strategy& | PwC 40


BEV bus

Technical viability

Expected

value

Hybrid private carBEV

private car

BEV taxi

Fuel cell car

BEV truck

Fuel cell bus

Fuel cell

truck

Electric

• While BEV use cases start to plateau, fuel cell possibly not yet at peak

• European experts rate fuel cell potential higher than Chinese respondents – in particular for commercial vehicles (bus, truck)

High High

HighHigh

Typical

hype cycleTypical

hype cycle

Innovation triggerInnovation trigger

On-demand shuttles

Technical viability

Car leasing

Expected

value

Car rentalCar subscription

Car sharing

Air taxis

Corporate shuttles

and commute

Ride hailingRide sharing

Micro-mobility

Automated

highway pilot (L3)

Technical viability

Expected

value

Full AD

private car (L4)

Long sistance

trucking (L4)

Full AD

last-mile goods

delivery (L4)

Automated

valet parking (L2)

Automated

safety (L3)

Full AD-people

mover (L4)

Full AD

robotaxi (L4)

Experts rate L4 market potential and technical viability for goods transport higher than for passenger transportUse case evaluation (2/2) – Automated and Smart Mobility


Automated

• L3 use cases (highway pilot, automated safety) seen to have relatively high market potential and viability across regions

• Most L4 use cases below/after first expectation peak – commercial use cases (trucking, last-mile) with higher market potential than private use cases

Strategy& | PwC 41


• Many smart mobility use cases deployed and therefore at plateau stage

• Micro-mobility with high value expectation – on par with ride hailing

• View on air taxis still unclear, to some extent seen as niche market with low viability

Smart Mobility

High High

HighHigh

Typical

hype cycleTypical

hype cycle

Innovation triggerInnovation trigger

CONNECTED

SMART

MOBILITY

AUTOMATED

ELECTRIC

Cyber-Security

Well-funded specialized players and startups put traditional players under pressure across all CASE componentsMap of CASE technology players (selection)

Strategy& | PwC

OTA = Over-the-air V2X = Vehicle-to-anything V2G = Vehicle-to-grid


Battery technology & recycling E-powertrain &

vehicles

Connectivity, OTA & data

Smart parking

Passenger safety

Software (perception,

labeling, decision, …)

Radar

LiDar

Aerial vehicles / drones

Teleoperation

V2X

People movers

2 Market potential and economics

ADAS full stack

Connected

services

Charging

V2G/Energy Management

Last Mile Solutions

Wallbox Driivz

EV Connect

Virta

NUVVEGreenFlux

Has-to-be

Volta

ChargePointElli

IONITY

ChargeNow

BYTON

NIO

Proterra

BMW iNEXT

Sono MotorsOla

Lucid Zero

Unu Motors

Bosch Leapmotor

VW ID.3 WM Motor

Faraday Future

NorthvoltThe Mobillty House

CATL QuantumScape

Sila NaotechnologiesTESLA

Aquion Energy Enevate

Trillium Mocana Upstream

NexarWayRay Neteera Eyesight

Bliq PARK NOW

Parkopedia Passport Parking

Evopark

Autotalks

Savari

Valens

Kymeta

Veniam

TwentyBN

SCALE

Phantom AI

Cortica

TetraVue

Arbe

Oculii

Metawave

LuminarInnoviz

FormantPhantom Auto

Navya

2getthere

EasyMile

Zipline BDR

Airobotics Skycatch PykaTuSimple

We Ride

Nuro

Zoox

Waymo

Five AIAurora

Mercedes me

BMW

We Connect

OnStar

CLOUDCARTeraki

CARUSO SiriusXM

TERALTYCS Otonomo

Goggo network Anagog

GEOTABREVIVER

RIDECELL

Micro-mobility Air taxis

Car subscription

Last-mile

delivery

Ride hailing / pooling

Car sharing Mobility

operating

system

Smart city

data platforms

NME

Rappi

SWIGGY

Instacart

Uber Gojek Grab BlaBlaCar

Steer SIXT+

FAAREN

Cluno

Like2driveCareby

VolvoCONQARDrover

Zipcar MILES Turo

GoCarma Getaround SHARE NOW

Bird Dott TIER Lime

VoiEmmy Nextbike

Via

Vulog

Wunder Mobility

Maas global

Moovit

Citymapper

ClearRoad

Coord

Trafi

Skyryse

ZEVA AERO

Daedalean

LILIUMJOBY

Kitty Hawk EVA

Voyage

Automotive OEMs’ connected service roadmap is evolving with different priorities and ambition levelsConnected services – Examples

Strategy& | PwC

*) Announced by OEM



Vehicle

features

-as-a-Service

Vehicle-

centric

services

Beyond-

vehicle

offering

Data/insights

services

Sound– BMW e-engine sound pack

Cruise control– BMW adaptive cruise control

Phone integration– Daimler MBUX

Suspension– BMW adaptive suspension

Pak assistant– Audi A6 parking assistant*

Autonomous driving – Tesla autopilot upgrade

Light– BMW high beam assist

Camera– Tesla sentry mode

Access– Tesla virtual bluetooth keys

Parking search & pay– VW we park

P2P car / ride sharing– Sono motors app

Fleet mgmt. / diagnostics– Daimler connect business

Car data marketplace– Caruso, Otonomo, High M.

Car data based insurance-- BMW CarData

Driver’s log / GPS tracking– Daimler connect business

Predictive maintenance– BOSCH, Carmen

Loyalty program– My Chevrolet Rewards

Vehicle management– VW we connect

Intelligent car assistant– Alibaba Audi/Volvo/Daimler

Gaming – Tesla arcade

Entertainment– Tesla caraoke

Music– NIO radio

Advanced navigation– MB live traffic

Music streaming– BMW Spotify

Passenger safety – NIO fatigue warning

Smart Home Connection– BMW IFTTT

Last Mile Logistics– NIO delivery in trunk

Degree of innovationRelatively low Relatively high

Established players New players

Personal emergency assistant– GM OnStar guardian

Connected service monetization remains challenging –potential for B2C monetization of $66 bn by 2035Connected services – Market outlook

General assumption: OEMs launch a portfolio of services with direct monetization intent HMI: Human machine interface

Source: Strategy&

Revenue potential (B2C) (in USD billions)

4.8

18.423.122.4

10.814.6 16.9

2.2

2020 2025 2030 2035

14.9

1.05.3

26.2

• Overall revenues from vehicle-centric connected services (e.g. advanced navigation) are driven by growing connected car penetration

• However, willingness to pay per service quickly erodes as customers get used to the specific service (commoditization)

• Profitability depends on OEMs’ pricing strategyand network operator cost (data plans)

• As connected services increasingly contribute to overall customer experience, OEMs continue to invest in innovative offerings despite limited profitability

• In-vehicle service marketplaces accessible via HMI (5th screen) provide additional revenue opportunities, but at limited margins due to relatively low commissions for the OEM


Comments

Strategy& | PwC 44

Vehicle-

centric

services 2)

Presentation

layer Personalization

layer

Content and

service

creation

Aggregation

layer

Provide

intelligence

Pay for

intelligence

Forward

service

payment and

charge fee

Pay service

Decideto buy

Provide

feature

Forward feature

payment and charge feePay offering

Forward commerce

payment and charge fee

Provide

offering

Sharedata

Pay

feature

Driver/rider

Place

offering

Provide

service

Run ad/

sponsoring

Pay ad/

sponsoring Curate

Connected service marketplaces bring physical and digital content to riders via a central, curated personalization layerConnected services – Marketplace example

• In-vehicle marketplaces enhance driver and rider experience by providing a range of features, services and goods (OEM, partners)

• Marketplace operators enable drivers/riders to experience and consume OEM and 3rd party brand environments with in-vehicle or external fulfillment

• As the key driver/rider touchpoint, in-car smart assistants remain a battleground – premium OEMs go captive, others prefer open source

• Direct B2C/B2B monetization challenging:

− Captive (Vehicle FaaS, vehicle-centric services) → limited willingness to pay

− Brokered (Vehicle-centric, beyond-vehicle offering) → limited transaction volumes, relatively low commissions

− Ads/sponsoring → limited number of eyeballs

Key findings and implications

Strategy& | PwC 45

1) Service delivery primarily outside the vehicle (e.g. goods commerce, mobility services, digital life services)

2) Service delivery primarily inside the vehicle (e.g. vehicle management, in-vehicle content)

3) On-demand booking of vehicle hardware/software features (e.g. seat heating or power upgrade on demand)

Source: Strategy&

Value/service flow

Payment flow

2 Market potential & economics

53137 2 21 34 119 17 4426

83136

238

76

20302020

16

20352025

4

170

2234

20

105

314

Electric powertrain and battery markets expected to grow strongly, especially in EU and ChinaElectric powertrain and battery – Market outlook

Strategy& | PwC

1) Revenue on OEM sales price level



Battery cells and systems Rest of electric powertrain

Revenue potential1) (in USD billion)

89163

14

113

18

47

4 5215

2467

210 • Market potential development driven

by significant increase in alternative

powertrain penetration

• Increasing number of favorable legislations

(e.g. city bans for combustion engines) and

general popular sentiment are underlying

drivers for global electrification trend

• Battery cells and systems experiencing

large drop in costs, but still represent by far

the largest cost share in electric powertrains

• Next to battery, second largest cost share of

electric powertrain within e-axle (covering

electric motor, inverter and gear)

Comments

Cell prices and selected optimization measures till 2030 (€/kWh)

Cell designActive

materials

2020 price Passive

materials

Dry

processing

Process

optimization

3-5

Target 2030

1-2

90 8-12

2-41-2

68

BEV powertrain cost is driven by the battery system (80%); cost reduction of 25% on cell and system level expected by 2030Electric powertrain and battery – Cost breakdown

Strategy& | PwC

OEM production costs 2020, 60kWh/100kW, volume class; € thousand; projection based on existing NCM battery technology



11%

80%

9%

eAxle

• Inverter

• Electric

motor

• Gearbox

HV system and

auxiliaries

• HV wiring

• LV-DCDC converter

• On-board charger

• HV heater

8.5

…

10.5

Battery system

• Cells• Wiring

• Fuses and contactors

• Cooling

• Housing

• Battery system as the main cost

component for a BEV powertrain

(approximately 80%)

• Within battery system, cells

comprise most of the associated

costs, with optimization of their

production process as an important

cost lever

• Optimizing active materials

(e.g. decreasing cobalt content)

and passive materials (e.g.

reducing purchase prices) can help

to substantially decrease cell and

battery system costs by 2030

• Recycled cell material with

additional high cost optimization

potential

Key findings and implications

• Increase specific capacities by Ni increase

(cathode) and Si blend (anode)

• Decrease of cobalt content (cathode)

• Optimize purchase prices, e.g. by

increasing supplier sets for

housings and separators

• Reduce separator and current collector

thicknesses

• Increase coating thickness

• In-line quality control

• Big data analytics

• Elimination of solvent (e.g. NMP)

and recovery process

• Elimination of drying process

Cost breakdown BEV powertrain

Large (>70 Ah) automotive cells in large quantities (>10 GWh/p.a.)

OEM revenues allocated to ADAS parts expected to reach $142 bn by 2035 – L4 revenues to quickly outperform L3 once availableAutomated driving – Market outlook

Strategy& | PwC

1) Passenger vehicles and people movers


Revenue potential1) (ADAS parts value contribution to total vehicle sales, in bn USD)


• The forecast reflects the additional

revenues of OEMs through new ADAS

components (sensors, actuators, computers,

wiring harness, HMI, ...) in the vehicles

• Strong revenue increase due to EU

regulation from 2022 to 2024, and at the

same time price decrease due to scaling

effects

• Strong increase of Level 3 applications

expected in North America, China and EU,

beginning 2026

• Push of Level 4 applications expected after

2029 with increased use of highway pilots

and valet parking in China and EU

Comments

6

1214

10

910

147

2437 33

18

Level 0-2 Level 3 Level 4

34

123

1014

10

1011

156

16

36

39

269

2020 2025

1215

10

2030

37

14

2035

9

73

ADAS cost is driven by sensor prices (>50%); LiDAR sensors / computing expected to drop significantly once volumes growAutomated Driving – Cost breakdown

1) Excluding OEM development and assembly cost

Source: Strategy&

Level 2Level 0 Level 1

21%

58%

10%

6%

3%

4%

Level 3

53%

24%

10%

11%

Level 4

~80~200

~400

~2,400

~4,300

Sensor Computing CommunicationActuator Others


ADAS System Material Cost1) per vehicle (in USD, 2030)

• Significant cost reduction expected for

LiDAR sensor and computing unit with rising

volumes

• Cost reduction of cameras and radar

sensors expected from 2022 to 2024 with

new EU regulations due to increase in

volumes and scaling effects

• Higher cost reduction expected for better

equipped Level 3 and 4 vehicles due to new

sensor technologies and rising scaling

effects

Comments

Strategy& | PwC 49

Alternative car ownership models offer new opportunities with increasingly blurred lines between mobility modesSmart mobility – Subset: Traditional vs. alternative car ownership models

Ownership

modelsPurchase1 Leasing2 Subscription Rental Car sharing

Ride hailing/

sharing1) Micro-mobility

Traditional car ownership Alternative ownership

Automated

people mover

Driver

motivation

and distance

sweet spot

Control-

seeking, all

distances

Flexibility-

driven, intercity

medium

distances

Time-sensitive,

short urban

distances

Time-sensitive,

super-short

urban distances

Comfort-

seeking, short

urban distances

Avoiding

upfront

investment,

all distances

Experience-

driven, all

distances

Spontaneous,

short urban

distances

Total cost of

mobility

(TCM) per km

today2)

0.6

$/km

0.4

$/km

0.8

$/km

0.7

$/km

1.1

$/km

1.6

$/km

<1.9

$/km4)

2.1

$/km

5-7%Profitability

today3) 10-15%10-15%No data

available<5% 7-10%

Not yet

profitable

Not yet

profitable

3 4 5 6 7 8

50

1) Multiple people pooled in one ride 2) TCM = total cost of mobility for end user in Germany incl.: vehicle (mid-sized car), insurance, maintenance, and gas; figures base on typical usage patterns per mode;

3) Estimate based on annual reports, newspapers, expert input

Assumptions: Mode 2: average of leasing offers 15,000km yearly, 24 months, Mode 3: average of current subscription offers, Mode 4: average of rental offers at 250km over 3 days, Mode 5: typical city trip, Mode 6:

typical city trip by taxi, Mode 7: typical city trip, Mode 8: average of current micro-mobility offerings (e-scooter)

Source: Strategy& researchStrategy& | PwC


Alternative car ownership offers significant market opportunities in Europe, followed by China and the USSmart Mobility – Subset: Alternative car ownership market outlook

Source: Strategy&


• Alternative car ownership sector = Active shared (car

subscription, rental, sharing) + passive shared (ride

hailing, robo-hailing) mobility modes

• COVID-19 and delayed L4 technology resulting in more

conservative projections than previously shown

• Europe: Established active / passive shared mobility

modes plus increasing demand for subscription models

• US: Moderate market outlook given strong preference

for car ownership at comparable low cost

• China: While kilometers driven in shared passive modes

(in particular taxi) are much higher than elsewhere,

per-km prices are 3-4 times lower resulting in overall

lower market potential than in Europe

• While automated driving will push shared modes in the

long run, it will take >10 years until superior economics

are achieved in a broad majority of use cases (beyond

urban mobility in larger cities)

CommentsTotal revenue potential (in USD billion)

110 164293

403

99

146

209127

1745

549

392

46 84 126 173

103168

248362

2020 2025 2030 2035

Strategy& | PwC 51

DE Rest of Europe

Operate

bus

Operate

people

mover

Smart Mobility – Example: Automated people movers

1) Ø speed bus 13 km/h; Ø speed people mover is 10 km/h; Ø operating hours per day: bus up to 21h, people mover up to 15h; Ø ride distance per person 5 km; Occupancy

of vehicles up to max. capacity (bus 60 persons, people mover 12 persons) before another vehicle is used 2) Required charging / driver change time not taken into account


200

400

600

0

800

13:0

0

Time

01:0

0

20:0

0

Demand

(pkm/h)

00:0

0

02:0

0

03:0

0

11:0

0

04:0

0

15:0

0

05:0

0

06:0

0

07:0

0

08:0

0

09:0

0

10:0

0

12:0

0

14:0

0

17:0

0

16:0

0

18:0

0

19:0

0

21:0

0

22:0

0

23:0

0

24:0

0

Supply BusExemplary demand in pkm/h Supply 1-6 People mover

Cost – Automated people mover vs. bus1) Mobility mix optimization (simulation)

1.000 1.5000 3.000500

0,5

2.000 2.5000,0

1,0

1,5

2,0

# of person rides per day

Mobility cost

(€/person-km)

Bus in regular service (Diesel)

Automated people mover

@ €120k vehicle price

Automated people mover

@ €250k vehicle price

Bus only

People mover only

Mixed operation

24h bus/0h people mover



100 (indexed)

128 (indexed)

82 (indexed)

-18%

Drive time2) Total operating costs

Operator cost optimum is achieved by dynamically combining

people movers with traditional busses

For low demand routes (< 1.000 person rides / day) people

movers have a clear cost advantage vs. traditional bus services

Strategy& | PwC


Excl. costs for AD infrastructure

Mode-specific view required to assess cost advantage of new mobility (e.g. people mover) vs. existing modes (e.g. bus)

A profitable smart mobility business requires the right selection of value blocks – potentially combining B2C and B2B offeringsSmart mobility – Main value blocks


• Players entering the smart mobility space

must evaluate four questions

– Where to play in the mobility

ecosystem (which value block / mode)?

– What is the right offering (which degree

of business / technology enablement)?

– Who is the customer (B2C, B2B, B2G)?

– How is the offering delivered

(which partners) ?

• Identified opportunities should be

diligently assessed for attractiveness and

individual right to win

• Leading mobility technology players

pursue a dual strategy combining B2C

and B2B offering to stay close to the

consumer while quickly reaching scale

Business and

technology

enablement

Infrastructure provision

and operationOwn, deploy or operate

infrastructure (e.g. parking,

charging, connectivity)

Mobility service provision and aggregation

Provide mobility services to end-consumers

(e.g. single-mode like scooters or integrated multi-mode)

Public affairs, finance, and riskRun critical enterprise functions to ensure compliance,

financing and risk management

Vehicle provision

and operationOwn and operate vehicle

fleets (e.g. scooters, cars)

B2B-2-X

B2C

B2C

B2B

B2A

Enable mobility

players to run their

operations with

specific business

and technology

solutions

(e.g. consulting,

managed services

or analytics)

Comments


Strategy& | PwC

0

5

Investments[Bn €]

Traditional automotive players will need to rethink their investment strategy to capture value in a post-crisis growth eraOEM investment history and outlook

Strategy& | PwC

1) Incl. software and digital experience 2) Incl. fuel cells

Source: Strategy& research 54

Trade war

CO² regulations• With COVID-19 cutting topline and

regulatory pressure to adjust vehicle

portfolio (CO2 targets), liquidity became

critical over the 12 months – many

investments were put on hold

• Once entering a post-crisis era, OEMs

and suppliers will need to refocus their

investments to achieve a competitive

position

• While a push on electric mobility is

expected, the outlook on automated

driving and smart mobility is mixed

• In automated driving, an alliance approach

is expected to share development cost

• In smart mobility, OEM captives / banks

could become the driving force investing in

flexible leasing / subscription models

Pre-crisis Crisis Post-crisis

COVID-19

0

2

4

2016 20170

2019

1

2

2018 2020 2021 2022 2023 2024 2025

0

50

100

Connected1)

Flat – focus on onboard

experience & assistants

Automated

Decline – focus on scaling

L3, L4 postponed >2025

Smart Mobility

Decline – pulling out of

loss making businesses

Electric2)

Increase – focus on battery

technology & energy mgmt.

Outlook

3 Investment trends

Comments

Compared to VCs and Tech Players, OEMs lost ground in connected, automated and smart mobility investmentsInvestment overview (# of cases 2019/20)

Strategy& | PwC 55

OEMs1) Tech Players3)

OEMs focus on defending core business

with investments in alternative / electric

powertrain

Tech players accelerate with selective

high-volume investments into connected /

automated driving

VC‘s investing in startups building full

stack expertise for smart mobility

solutions

Venture Capitalists2)

3 Investment trends

21 2311

10

8 13

8

1

4

43

Q1/2 ’19

3

3

Q3/4 ’19 Q1/2 ’20

47

16

1

Connected Automated Smart Mobility Electric

9 1018

22

368

10

12

7

10

8

3

Q1/2 ’19

51

36

Q3/4 ’19 Q1/2 2020

66

4 45 5

13

2

3

Q1/2 ’19 Q1/2 ’20

0

Q3/4 ’19

812

2

11

2

Source: Strategy& research, company press announcements, financial statements. Analysis shows total number of single investments (independent of investment amount) 1)

Analyzed largest investments of 10 relevant global OEMs incl. Volkswagen Group, Toyota, GM, Hyundai-Kia, Ford, FCA, Nissan / Renault / Mitsubishi, PSA, BMW Group,

Daimler; incl. inter-company investments (e.g. into plants) 2) Analyzed largest deals as available, Source: Pitchbook 3) Analyzed relevant investment of 10 global Tech

Players incl. Apple, Microsoft, Alphabet/Google/ Waymo, Tencent, Alibaba, Amazon, Uber Technologies, Baidu

VC’s invest increasingly in specific software applications with focus on connectivity, security, and platform integrationInvestment themes and trends

Strategy& | PwC

1) Based on expert opinion (considering recent investor activities, market size/growth, competitive dynamics)


Trend1)Investment theme Description

Invest momentum

Connected

Automated

Smart

Mobility

Accelerating Slowing down

Smart parking

Connectivity & data management

Passenger safety

Cyber-security

Software to locate and navigate to free parking space; facilitate payment transactions; enable parking space management

Technology (software/hardware) to provide vehicle connectivity, cloud-based mobility/vehicle data management, and analytics services

Technology to improve driver’s safety (e.g. augmented reality/dash cams) and monitor driver’s health (e.g. micro sensing/monitoring of vital signs)

Technology to protect connected vehicles and smart mobility/IoT providers from cyber-threats and misuse

Electric

Software (perception, decision, …)

People movers

V2X

Radar/LiDar

ADAS full stack

Teleoperation

Aerial vehicles

Air taxis

Car sharing

Car subscription

Last-mile delivery

Ride hailing/pooling

Micro-mobility

Battery & powertrain technology

Electric vehicle startups

Machine learning algorithms/software to enable visual identification and tracking of environment and moving objects for automated driving

Technology to provide an electric, automated vehicle (for 7-12 passengers) navigating on defined routes (separate lanes or mixed traffic)

Vehicle-to-anything technology allowing vehicles to communicate with their environment (e.g. other cars, traffic systems, charging station, smart home)

Radio/laser wave sensors/imaging technologies for automated driving systems (e.g. measuring distances of surrounding objects)

Integrated technology stack (software and hardware) providing end-to-end advanced driver assistance capabilities (L3/4/5) to vehicles

Systems that enable a human operator to observe/analyze/operate and remotely intervene when automated vehicles need assistance

Drone technology (hardware, software) enabling manned & unmanned vehicles to operate in the sky (e.g. for surveillance or people/goods transport)

Air mobility solutions providing automated guidance, navigation, operation and control of new, small aircrafts (mostly electric powered)

Platforms matching cars with customers for short-term rent by the minute (station-based or free floating; professional fleets or private cars/peer-to-peer)

Platforms offering cars (single brand or multi-brand) for short-term lease with monthly model switch or termination option at a monthly package rate

Platforms enabling urban door-step delivery of goods (e.g. grocery/food/e-commerce) matching riders with merchants/consumers

Platforms matching drivers with riders to conduct individual trips (hailing) or to enable shared trips with multiple passengers (pooling)

Platforms offering ultra lightweight vehicles (e-bikes, scooters) for short-term rent by the minute (station-based or free floating)

New vehicle concepts with dedicated platforms, architecture and design for fully electric driving (light vehicles, vans, trucks)

Battery and powertrain technology to improve charging time, range, lifetime, performance, cost and safety

Charging & V2G/energy mgmt. Charging infrastructure solutions to enable convenient charging environment (including routing to charging station, reservation, charging, payment)

Mobility operating system Modular system of various software components to enable mobility platform operations (fleet mgmt., asset lifecycle mgmt., booking engine, …)

Smart city data platform Platforms integrating large amount of data from various stakeholders to connect city operations and optimize urban traffic (tolling, traffic mgmt., routing, …)

3 Investment trends

Rebalance efficiency programs

Review and calibrate cost-down targets; enforce ongoing restructuring; selectively invest in process improvements

Grow differentiating digital capabilities

Reconfirm capability requirements; increase focus on software; ensure sufficient build-up time; engage with partners

Conclusion: Traditional automotive players need to balance their defensive and attacking games to stay competitiveKey take-aways for traditional players

Strategy& | PwC 57

Defense Attack+

CASE

portfolio

Organization

Business

model

Operations

Technology

Define basic tech stack

Define stack required to enable minimum needed technology capabilities

Build basic set

Build basic platform technology (e.g. ID, APIs) and develop prototypes using new technologies

Restructure CASE investment portfolio

Refine investment criteria and strategy; review investments; refine governance; divest assets with unclear profitability outlook

Repair core business (vehicle sales)

Stimulate demand after COVID-19 with flexible pricing (discounts, subscriptions); increase direct-to-consumer efforts

Double down on ONE way to play

Define 1-3 (max.) growth areas along CASE invest themes; refine own market role; accelerate scale-up via acquisitions

Continue digital enablement programs

Accelerate roll-out of digital workplace agenda; push data-driven mindset and decision making; deploy agile organization

Strengthen system-based engineering and x-functional work

Introduce new development approaches (from aerospace; tech); invest in dedicated speed-boats; invest in partnerships

Consolidate IT transitions

Review IT roadmap; accelerate programs with clear benefit case (cloud transitions); postpone long-term core transitions

Build open technology platforms

Rethink tech architecture for connected services; invest in cloud-based vehicle architecture; join ADAS software platforms

Reimagine platform-based business models

Use momentum in e-mobility to strengthen alliances; expand infrastructure partnerships; test ecosystem monetization options

c

Source: Strategy&

Building a software-enabled automotive company3

Volume

58

Volume 2 – Recap

This volume focuses on the key capabilities to become a software-enabled company and how to build them up

59

• Use cases based on CASE technologies are at different stages of maturity and vary in expected market potential

• Well-funded start-ups trying to capture the CASE market potential put traditional automotive players under pressure

• The COVID-19 pandemic has widened the investment gap between OEMs and VCs – Top 10 OEM investments shrunk 66%, whereas VC investments grew 83%

• To compete in the long run, OEMs need to refocus their investment priorities based on specific ways to play, and strengthen their digital capabilities

Volume 3 – Scope of this volume

• Increased demand for intelligent and connected

functionalities will significantly change the

Automotive product and related services

• Software has become the differentiating factor

for modern vehicles. Development cost will

increase and shift from hardware to software

• OEMs must carefully select the areas where

and when they will enter the software

competition themselves

• Collaborative partnerships with competitors,

suppliers and technology players on an equal

footing can help to master complexity, the need

for talent and to reduce expenditure

• A culture change and transformation

throughout the company and at all levels are

required to adapt to the new paradigm and to

build successful software-enabled products

Economics

Use case

maturity

Market potential

Opportunities

and investments

Software

Investment need

for Software

Make, buy,

partner strategy

Collaborative

partnerships

Culture

change

Strategy& | PwC

Software has become the key differentiating factor for modern cars

Source: Strategy& analysis, Statista, IEEE, Morgan Stanley Research, Market Research Future, IHS

Software in Automotive

Connected Vehicles, Automated Driving,

Smart Mobility and Electrification

increase the amount of vehicle software

by more than 300%

Software development cost per model

series will grow by 83% within the next

decade

Software will contribute up to 60% to the

perceived value of a vehicle in 2030.

Alternative ownership models could

increase this value even more

Continuous development and security

patches will trigger a software update at

least every 3 months in 2030

60Strategy&

300%software increase

83%growth in development costs

60%of vehicle value add

3 monthssoftware update cycle

Strategy& | PwC

Main drivers for change:

• Functionality:

– Gen Y customers as digital natives will become a

substantial vehicle customer segment

– A growing Chinese market will further increase

requirements on digital experience

– Intelligent and connected functionalities require

a software refresh in shorter and shorter cycles

• Technology and processes:

– E/E architecture change from distributed ECUs to

centralized controllers will shift development costs

from hardware to software

– Functionality, shorter development cycles,

interdependencies and integration efforts will

increase software development and testing effort

• Safety and compliance:

– Safety and regulatory requirements, esp. in

AD/ADAS will drive up software development and

validation cost

– Requirements for revalidation after adaption to

model specific environment drive workload

Driven by a change in user expectations and functionality, soft-ware development costs will grow by 83% within the next decade

61

246

(31%)

181

(34%)

787

525

145

(28%)

199

(38%)

2021

331

(42%)

211

(27%)

2030

Test &

Validation

Software

Hardware

Growth

2021-2030CAGR

70% 6.1%

83% 6.9%

6% 0.6%

E/E development cost per model series (€ million)1

Strategy& | PwC

AD; Automated Driving ADAS: Advanced Driver Assistant Systems CAGR: Compound annual growth rate ECU: Electronic Control Unit 1: Development cost w/o lifecycle support

Source: Strategy& cost analysis based on investments in technologies and functionalities for premium vehicle. New domain controller architecture with shared software development across 7 models

Investment need

37%

11%

7%

15%

30%

Chassis Control

9%

331

2021

6%

45%

24%

15%

2030

AD/ADAS

Body & Comfort

Infotainment &

Connectivity

Powertrain

181

ADAS functionalities as main driver for software cost will grow by 120%, accounting for 45% of the software cost by 2030

AD; Automated Driving ADAS: Advanced Driver Assistant Systems 1: Software development cost w/o lifecycle support

Source: Strategy& cost analysis based on investments in technologies and functionalities for premium vehicle. New domain controller architecture with shared software development across 7 models 62

SW development cost per model series (€ million)1

Main drivers for change (cf. Volume 1):

• AD/ADAS:

− Level 2 peak functionality, investments into level 3+

and legal safety requirements will drive up software

development cost by 120%

• Body & comfort:

− Smart health will increase development costs for

body & comfort functions; relative share stays small

compared to most other domains

• Chassis control:

− Development costs decrease due to significant

software reuse and decreasing consumer focus

• Infotainment & connectivity:

− Increased consumer requirements are partly offset

by software standardization and reuse,

development costs will increase by 48%

• Powertrain:

− Optimization of energy efficient driving will drive up

development costs significantly

Strategy& | PwC

Investment need

High development cost across the entire technology stack will force OEMs and suppliers to carefully select areas for investmentAutomotive digital technology stack

Source: Strategy& ADAS: Advanced Driver Assistance Services HMI: Human-Machine-Interface 63

Platforms and analyticsAI-based decision engines analyzing vehicle and environmental data

Vehicle operating systemSecure management of computing resources and SW services

In-vehicle connectivity and servicesSecure communication between domain platform computers

Security, reliability and complianceAutomotive-grade safety, reliability and compliance as key challenge

Vehicle computing platformEnabling current and future SW functionalities on powerful hardware

User experience / HMICompelling user experience, matching the brand

Functions / applicationsInnovative functionality in ADAS, well-being, infotainment and controls

Cloud platform and cloud servicesEnrich vehicle data and utilize cloud/edge computing resources

Backhaul connectivity and servicesSecure V2X communication and continuous updates

Electronics and power componentsControlled electronic and embedded software components

Investment need

Strategy& | PwC

Most areas of the technology stack with high

investment need driven by technical complexity

and required innovation

Collaboration with technology players and

competitors in new forms of partnerships will

scale economies and available talent

Transforming employees’ mindset – in particular

in R&D, procurement, partner management and

controlling – will be key for software innovation

Being innovation leader and first to market will

not be possible in all areas. OEMs and suppliers

need to carefully select areas for investment

HighLow

Investment need

Strategic decisions where and when to invest need to focus on three factors: Differentiation, complexity and sustainabilitySoftware sourcing strategy matrix

64

Collaboratewithin and across industries

Make

Buy off the shelfand adapt to Automotive

Partner

5 y

ear p

ers

pectiv

e

5 year perspective

Low High

Complexity

High

Low

Dif

fere

nti

ati

on

• OEMs and suppliers need to decide where and when they want to

compete in the software game since competing in the full stack will

not be possible financially or organizationally

• Strategic decisions need to focus on three factors:

I. Targeted differentiation matching the brand promise including:– Perceived customer value

– Competitive advantage

– Monetization potential

– Product dependencies

II. Anticipated complexity of the product and the technology including:– Availability of products / alternatives

– Maturity of technology and understanding

– Availability of skilled and experienced resources

– Forecast expenditure

III. Sustainability and timing of the differentiation including:– Today’s differentiating assets might become a commodity in 5 years' time

– Significant reduction of complexity and risk for 2nd mover

• Collaboration with automotive and technology players should be

favored to bespoke “Make” in areas with high complexity

Strategy& | PwC

Make-buy-partner strategy

Source: Strategy&

Buy off the shelf

and adapt to

Automotive

PartnerMake

Collaborate within and across

industries

Compliance

Test and

validation

User interface

Decision

engine

Data handling Integrated

development

platformLabeling

Data generation/drive-in

Sensor fusion

Perception functions

Actuators

High

Low

Dif

fere

nti

ati

on

Low High

Complexity

An exemplary analysis of Automated Driving shows that most functions and components should be developed with partnersExemplary classification of AD technology functions and components

Strategy& | PwC Source: Strategy& AD: Automated Driving 65

Example rationale:

• Make:

− User interface: Own intuitive user interface and user experience

matching to the brand. OEMs should develop own bespoke solutions

with limited effort

• Partner:

− Decision engine: Level 4+ functionalities with significant complexity.

OEMs and suppliers should combine competencies, share risks and

achieve licensing revenues in a 2nd wave

• Collaborate within and across industry:

− Test and validation: Complex technical challenge with limited market

differentiation. Collaboration and sharing of test data and methods

and joint tool development and open source will reduce time, cost and

risks for all involved parties without sacrificing differentiation

• Buy off the shelf and adapt to Automotive:

− Integrated development platform: Sophisticated platforms exist in

other industries. Buy off the shelf and adapt to Automotive

requirements, supported by specialized technology players

Make-buy-partner strategy

An integrated development environment built upon cross industry standards will lower project cost by up to 60%Integrated development environment for Automated Driving

AD: Automated Driving IDE: Integrated Development Environment

Source: Strategy& cost analysis for multiple AD projects with Camera and LiDAR functionality 66

Collaboration:

• Joint project by OEM and technology player as platform provider

• OEM provides automotive expertise and use case definitions for

development, testing and compliance

• Tech player provides first-class software development capabilities,

as well as global cloud infrastructure

• Combining talent and knowledge base resulted in short realization

time at high quality

Key cost reduction levers:

• Fully automated builds, continuous integration and continuous

testing

• Consistent incident management across the toolchain

• Integrated test environment with scaled virtual testing in the cloud

• Automated test reports for AI-based functionality, ISO26262 and

SOTIF incl. archiving of software builds and test results

• Automated project planning, tracking and reporting, improved

processes and team communication

• Full transparency on status between supplier and OEMs, facilitated

reporting and problem managementTypical project cost

w/o AD IDETypical project cost

w/ AD IDE

40-65%

5-10%

20-25%

Test and

validation

0-20%

20-25%

35-50%

5-10%

100%

Software

15-25%

10-15%

Other

Compliance

Other

Software

Compliance

Test and

validation

-35% to -60%

Strategy& | PwC

Collaborative partnerships

Cost saving potential per project

Platform

components

The integrated development environment spans requirements, realization, test & validation, operations and complianceIntegrated development environment for Automated Driving

67

Requirements engineering

• Environment to specify, collaborate, align and

discuss product and product validation requirements

• Decomposition of requirements to disciplines

(system, HW/mechanics, SW, test & validation)

• Traceability and transparent view on maturity

progress across disciplines

Realization

• Environment supporting architecture design,

code generation, manual coding, versioning,

refactoring, debugging, code analysis and test

• Automated verification of designs and code

(documentation, unit and module tests)

against company and project standards

Test scenarios and data

• Environment to generate, capture, store, analyze

and correct test scenarios, data and configurations

that are required for product test and validation

Compliance

• Environment to document and assess product issues

identify root causes and trigger issue resolution

• Compliance conformant documentation of

requirements, architectures, designs, software builds,

test execution results and data

Operation

• Environment to control, manage, maintain and

operate products and related platforms, e.g.

conducting (over-the-air) software updates,

assessing (live) product usage and

performance, operating test platforms and

vehicle fleets

Test & validation incl. security

• Environment to design, specify, program and validate

tests, document results and assess progress

• X-in-the-loop platforms to execute model, process,

software, hardware/mechanics and system tests

(incl. smoke, flash and end-of-line tests)

ComplianceRequirements

engineering

RealizationOperation

Test &

validation

Test

scenarios

and data

Strategy& | PwC

Collaborative partnerships

Source: Strategy&

In order to successfully develop and collaborate with partners OEMs will have to undergo a cultural and mindset changeRequired mindset change in collaboration

Strategy& | PwC Source: Strategy& 68

Everything needs to be done by us, now dispersing talent across many areas

Achieve minimum requirements at best costoften selecting best cost, not best partner

Detailed and early specification of requirementsoften limiting the solution space and innovation

Meticulously planned development schedulesoften demanding unrealistic and waterfall developments

High financial pressure on supplieroften squeezing out any risk buffers

Principal-agent-based working modeloften lacking communication and team spirit

Management decision in silosoften late decisions with reduced information and accountability

Decide on few differentiating areas for own innovation that match your brand promise

Aim for the best partnerbeing first to market, achieving cost reduction in a 2nd step through scale

Clearly define objectives, not the solutionallowing for new and creative approaches

Provide rough timeline of functionalitiesutilizing the strength of agile development

Engage in real partnership and share benefitsincentivizing innovation after project award and even after SOP

Establish one joint teamenabling collaboration of best talent and scale across companies

Give responsibility to the teamenabling decisions that span business, technology and operations

Strategy

Ambition

Objective

Timeline

Finance

Collaboration

Decisions

Traditional behavior New behavior

Culture change and transformation

As a consequence OEMs and suppliers need to transform throughout the firm to build up software excellence

Strategy& | PwC Source: Strategy& 69

Strategy & Product• Decide on level of digitization and timeline and own

“digital brand differentiation”

• Invest in “a few own differentiators”, leverage

collaborations for non-differentiating components

• Change from design-build-ship to “continuously

evolving product“

• “Increase cooperation” with competitors, suppliers

and technology players on an equal footing

Technology & Processes• Disruptively “rethink the product car” and

modularize the E/E platform and architecture

• Change from top-down specification to “step-wise

agile” product ideation

• Transform R&D processes to “continuous and

scaled development”

• Establish “integrated toolchains” to develop and

operate cost-efficient, safe, secure, compliant and

trusted products and services

People & Culture • Establish agile “fail fast” culture, break hierarchies

and “enable team decisions”

• Strengthen “culture of collaboration” and open

knowledge sharing internally and with partners

• Establish “flexible org structures” and empowered

“cross-functional teams” with business and

technology responsibility

• Embed “digital at all levels” and invest in talent,

don’t do the transformation half-heartedly

Customer, Value & Cost• Leverage “direct end-customer interaction” and

information about the use of the product

• Drive new sources of revenues by “scaling

software” across models and brands and by using

dynamic pricing schemes

• Adapt cost prediction, financial management and

project excellence to the “new development,

operations and monetization paradigm”

Automotive software transformation areas

Culture &

Mindset

Talent, skills &

capabilities

Partner strategy &

management

Value & Cost

management

Digital &

software strategy

Compliance &

monitoring

Architecture &

technology

Platforms &

tools

Security &

digital trust

Product &

service

Customer

interaction

Organization &

governance

Development &

operational

processes

Project

excellenceAutomotive

software

transformation

areas

Automotive software

transformationareas

Culture change and transformation

Network contacts

Jörg Krings

joerg.krings

@strategyand.de.pwc.com

Automotive Europe

Jörn Neuhausen

joern.neuhausen


Alternative Powertrains

Jonas Seyfferth

jonas.seyfferth


Connected & Smart Mobility

Hartmut Güthner

hartmut.guethner


Automated Driving

Contributors

© 2021 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. Mentions of Strategy& refer to the

global team of practical strategists that is integrated within the PwC network of firms. For more about Strategy&, see www.strategyand.pwc.com. No reproduction is permitted in whole or part without written permission of PwC.

Disclaimer: This content is for general purposes only, and should not be used as a substitute for consultation with professional advisors.

Claus Gruber

claus.gruber


Software

Dietmar Ahlemann

Felix Andre

Sebastian Böswald

Thilo Bühnen

Christoph Faller

Martin Gerhardus

Sarah Nolte

Kevin Rothe

Tanjeff Schadt

Nicola Schudnagies

Felix Starke

Andreas Gissler

andreas.gissler


Digital Transformation

Jonas Heydasch

Andrew Higashi

Anil Khurana

Felix Kuhnert

Timo Kronen

Joram Lauterbach

Christoph Stürmer

christoph.stuermer

@pwc.com

Autofacts®

Akshay Singh

akshay.singh

@pwc.com

Automotive US

Steven Jiang

steven.jiang

@strategyand.cn.pwc.com

Automotive China

Digital Auto Report 2020

Documents

Transcript of Digital Auto Report 2020